- Fixed Rate Mortgage
- A fixed rate mortgage has the same interest
rate and monthly payment throughout the term of the mortgage. The
payment is calculated to payoff the mortgage balance at the end of
the term. The most common terms are 15 year and 30 years.
- Fully Amortizing ARM
- This is the most common type of ARM. The monthly
payment is calculated to payoff the entire mortgage balance at the
end of the term. The term is typically 30 years. After any fixed interest
rate period has passed, the interest rate and payment adjusts annually.
A Fully Amortizing ARM will also have a maximum rate that it will
not exceed. This calculator uses a maximum interest rate of 12%. Below
is a list of the most common types of Fully Amortizing ARMs.
| Common Adjustable Rate Mortgages |
| ARM Type |
Months Fixed |
| 10/1 ARM |
Fixed for 120
months, adjusts annually for the remaining term of the loan. |
| 7/1 ARM |
Fixed for 84
months, adjusts annually for the remaining term of the loan. |
| 5/1 ARM |
Fixed for 60
months, adjusts annually for the remaining term of the loan. |
| 3/1 ARM |
Fixed for 36
months, adjusts annually for the remaining term of the loan. |
| 1 year ARM |
Fixed for 12
months, adjusts annually for the remaining term of the loan. |
- Interest Only ARM
- An Interest Only ARM only requires monthly
interest payments. Since you are not paying any principal, as you
are with the other two types of mortgages described above, this can
lower your monthly payment. However, since your mortgage's principal
balance is not decreased, you will have a balloon payment at the end
of the mortgage's term. Like a Fully Amortizing ARM, an Interest Only
ARM will often have a period where the interest rate is fixed, and
then it is adjusted annually. An Interest Only ARM will also have
a maximum interest rate that it will not exceed. This calculator uses
a maximum interest rate of 12%.
- Mortgage amount
- Expected balance for your mortgage.
- Term in years
- The number of years over which you will repay
this mortgage. The most common mortgage terms are 15 years and 30
years. Please note that for the Interest Only ARM you will have a
balloon payment for the entire principal balance at the end of the
loan term.
- Expected rate change
- The annual adjustment you expect in your ARM.
The range for this calculator is minus 3% to plus 3%. Use a negative
value if you believe interest rates will decrease, a positive value
if you believe they will increase.
- Interest rate
- Annual interest rate for each mortgage type.
Typically an ARM will have a lower interest rate than a fixed rate
mortgage. The rate of an Interest Only ARM will vary by lender.
- Months rate fixed
- This is the number of months the rate is fixed
for an ARM. During this period the interest rate and the monthly payment
will remain fixed. The rate will then adjust annually by the expected
rate change.
- Interest rate cap
- This is the maximum interest rate for this
mortgage. The mortgage's interest rate will never exceed the interest
rate cap.
- Monthly payment
- Monthly principal and interest payment (PI)
for the Fixed Rate Mortgage and the Fully Amortizing ARM. This is
an interest only payment for an Interest Only ARM.
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